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IS BBBEE CONSTRUCTIVE OR KILLING SOUTH AFRICA’S FUTURE?

03 Sep 2018

FOOD FOR THOUGHT:

IS BBBEE CONSTRUCTIVE OR KILLING SOUTH AFRICA’S FUTURE?

Whenever business leaders meet, discussions invariably steer towards BBBEE. And opinions about its merits seem to be split. In the end, the question comes up: is BBBEE constructive or damaging to South Africa’s future?

Basically, the answer comes down to which side of the fence you are sitting. But there’s still the question: if your seat is on the right side, should you just sit and watch disintegration on the other side of the fence?

The Broad-Based Black Economic Empowerment Act (Act 53 of 2003) essentially works on the understanding that years of systemic racism contribute to contemporary economic woes, and that government intervention can stem the results of past racist regimes. However, the Act is highly controversial in nature and some consider its racial preference statements as a direct contradiction to the UN's Universal Declaration of Human Rights.

While narrow-based black economic empowerment led to the enrichment of a few previously disadvantaged individuals, the goal of broad-based empowerment is broader based i.e. to distribute wealth across as broad a spectrum of previously disadvantaged South African society as possible.

The measurement of such codes of practice are about ownership, management, control, employment, skills development, preferential procurement (particularly against those unwilling to participate), enterprise and socio-economic development. It is heavily skewed towards ownership, management control and enterprise and supplier development.

So, your view on whether the Act is constructive to the future development of the country or not, depends on which side of that fence already mentioned you are seated.

Discussion among players is interesting.

There are those who mention the abysmal performance of the State-owned Enterprises (SOEs) as the perfect example to adjudicate the long-term results of BBEEE policy. Here we have the opportunity of examining the results of vigorous BBBEE policy at its most efficient. We can take our pick: Eskom, SAA, Transnet, SABC, SABS, ARMSCOR, THE POST OFFICE are just a few large examples. Then there’s a myriad of local municipalities which have firsthand experience of a politically motivated BBBEE policy. All the above-mentioned entities were predominantly profitable enterprises, BEFORE they were systematically subjected to the BBBEE principle of ownership, management, control, employment, skills development and - dare one mention it - preferential procurement. I am sure that I don’t have to insult the reader by comparing the financial performances of the abovementioned organisations prior to and after BBBEE. Just how this falls into the strategy of empowering and redistributing wealth to a broader spectrum of previously disadvantaged South Africans is mystifying. Perhaps the billions that have been squandered should just have been redistributed instead.

Business owners - predominantly the now disadvantaged whites - are asking a simple question: “Why should I hand a business that I have sweated to build, financed personally, and guided for future generations of my family, to a total stranger with no experience, with questionable education and skills to potentially run into the ground like ESKOM and SAA? It’s my legacy to my family. I would rather close it down than give it away and see it destroyed.”

The argument has been presented that black entrepreneurs – and, yes, there are many successful ones - do not have access to capital compared to the white business community. But what about the billions of rand in capital injections that the government is making into the abovementioned SOEs without much success?

The effects of our new form of discrimination is devastating when it comes to overseas investment. What possible argument can the South African operations of a multi-national company put to its overseas board members when trying to encourage the holding companies to increase investment in the South African operations when they have to add a caveat: “But incidentally we will have to give away ownership and control of the company”

Are you surprised that many companies are putting the brakes on expansion and development of markets and rather placing their development dreams elsewhere?

Well, there you have the facts. Based on the achievements of our state-owned enterprises, if one were to pose the question: is the 2015 BBBEE Act constructive or killing the future of South Africa, what would the answer be?

Either side of a fence in a country that’s collapsing is not an enviable position. Makes you think, doesn’t it?

DERYCK SPENCE

Executive Director – SAPMA.

Ends

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